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Concept, Measurement and Causes of Poverty: Nigeria in Perspective

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DOI: 10.5923/j.economics.20120201.04

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American Journal of Economics 2012, 2(1): 25-36
DOI: 10.5923/j.economics.20120201.04

Concept, Measurement and Causes of Poverty: Nigeria

in Perspective
Olatomide Waheed Olowa

Department of Agricultural Education, Federal College of Education (Technical), Akoka

Abstract The paper discusses the concept of poverty and elucidates the various methods of measurement used in evalu-
ating poverty. Causes of poverty in Nigeria were also brought into perspective. It was concluded that inadequate economic
growth is the main cause of poverty in Nigeria.
Keywords Nigeria, Poverty, Perspective, Alleviation

inequality); poverty will generally be greater in the country

1. Introduction with higher inequality, since there will be relatively more
people with incomes lower than the poverty line (L). Thus,
A concise and universally accepted definition of poverty is the distribution of income has an important influence on
elusive largely because it affects many aspects of the human poverty.
conditions, including physical, moral and psychological. Social science literature is replete with attempts by
Different criteria have, therefore, been used to conceptualize economists and social scientists to conceptualize the phe-
poverty. Most analyses follow the conventional view of nomenon of poverty. Broadly, poverty can be conceptualized
poverty as a result of insufficient income for securing basic in four ways; these are lack of access to basic needs/goods; a
goods and services. Others view poverty, in part, as a func- result of lack of or impaired access to productive resources;
tion of education, health, life expectancy, child mortality etc. outcome of inefficient use of common resources; and result
Blackwood and Lynch (1994), identify the poor, using the of “exclusive mechanisms”. Poverty as lack of access to
criteria of the levels of consumption and expenditure. basic needs/goods is essentially economic or consumption
Further, Sen (1983), relates poverty to entitlements which oriented. It explains poverty in material terms and specifi-
are taken to be the various bundles of goods and services cally employs consumption -based categories to explain the
over which one has command, taking into cognizance the extent and depth of poverty, and establish who is and who is
means by which such goods are acquired (for example, not poor. Thus, the poor are conceived as those individuals or
Money and Coupons etc) and the availability of the needed households in a particular society, incapable of purchasing a
goods. Yet, other experts see poverty in very broad terms, specified basket of basic goods and services. Basic goods are
such as being unable to meet “basic needs” – (physical; (food, nutrition, shelter/housing, water, healthcare, access to pro-
health care, education, shelter etc. and non – physical; par- ductive resources including education, working skills and
ticipation, identity, etc) requirements for a meaningful life tools and political and civil rights to participate in decisions
(World Bank, 1996). Poverty may arise from changes in concerning socio-economic conditions (Streeten and Burki,
average income or changes in the distribution of income. Let 1978). The first three are the basic needs/goods necessary for
us for instance, assume a relationship between the poverty survival. Impaired access to productive resources (agricul-
line (L) below which an individual is poor and the average tural land, physical capital and financial assets) leads to
incomes of the population (Y). The poverty index will de- absolute low income, unemployment, undernourishment etc.
crease (increase) as L (Y) increases (decreases). Since higher Inadequate endowment of human capital is also a major
average incomes are above the poverty line, other things cause of poverty. Generally, impaired access to resources
being equal there will be less poverty. Among the “other shifts the focus on poverty and it curtails the capability of
things” that are equal is the distribution of income. Compare individual to convert available productive resources to a
for instance, two countries with identical mean incomes (and higher quality of life (Sen, 1977;Adeyeye, 1987;Ogwumike,
po ver ty line), b ut with one having a wid er ar ea o f 2002).
distribution of incomes (that is one with greater income Poverty can also be the outcome of inefficient use of
common resources. This may result from weak policy en-
* Corresponding author:
[email protected] (Olatomide Waheed Olowa)
vironment, inadequate infrastructure, weak access to tech-
Published online at http://journal.sapub.org/econmics nology, credit etc. Also, it can be due to certain groups using
Copyright © 2012 Scientific & Academic Publishing. All Rights Reserved certain mechanisms in the system to exclude “problem
26 Olatomide Waheed Olowa: Concept, Measurement and Causes of Poverty: Nigeria in Perspective

groups” from participating in economic development, in- by foreign trade, technology investment and foreign man-
cluding the democratic process. In Sub-Sahara Africa (SSA), agement and is characterized by the beneficial values of
the agricultural sector was exploited through direct and in- discipline, hard work and productive creativity. On the other
direct taxation throughout the colonial and post-colonial hand, in the traditional sector, the static low- level equilib-
decades leading to poor growth performance of the sector, rium conditions advanced by the vicious circle of poverty
heightened rural -urban migration and employment crisis. In theory are said to hold. According to this school of thought,
urban SSA, Silver (1994) suggests three paradigms of ex- the subsistence life style and a cultural value that are an-
clusion: the individual’s specialization that cannot be ac- titheses to economic growth and modernization dominate.
commodated in the factor market (specialization paradigms); Local ineptitude and the people’s apparent lack of response
the various interest groups that establish control over the to normal monetary incentives to hard work therefore pro-
input of available resources, for example, on goods and vide explanation for poverty. This intuitively implies that the
labour markets and simultaneously foster solidarity within poor person is the cause of his/her poverty.
the respective interest groups (monopoly paradigms); and the Understanding the nature of poverty became upgraded
individual which has a troubled relationship with the com- with the modern theoretical approach that considers the
munity (solidarity paradigm). income dimension as the core of most poverty -related
Poverty can be structural (chronic) or transient. The for- problems. Poverty may arise from changes in average in-
mer is defined as persistent or permanent socio-economic come, or changes in the distributed income. Equitably dis-
deprivations and is linked to a host of factors such as limited tributed income increases the chance of the poor to have
productive resources, lack of skills for gainful employment, access to basic services (food consumption, housing etc).
endemic socio-political and cultural factors and gender. The Indeed, it is now generally agreed that although there is close
latter, on the other hand, is defined as transitory/temporary positive relationship between per capita income (PCI) and
and is linked to natural and man -made disasters. Transient the measures of well-being, it is not so much the level of PCI
poverty is more reversible but can become structural if it which determines capabilities but how it is distributed. The
persists. argument for growth as a precondition for poverty reduction
It is generally agreed that in conceptualizing poverty, low is because it increases, mean incomes and the narrowing of
income or low consumption is its symptom. This has been income distribution. Again, a major lesson that can be drawn
used for the construction of poverty lines. Various theories from the conceptualization of poverty above is that any at-
have been advanced in order to put in proper perspective the tempt to design pragmatic approach to poverty alleviation
mechanics of poverty. The orthodox Western views of pov- has to adopt mixture of strategies since poverty is multifac-
erty, reflected in the “Vicious circle” hypothesis stating that eted in scope and dimension.
a poor person is poor because he is poor, and may remain
poor, unless the person’s income level increases significantly
enough to pull the person in question out of the poverty trap. 2. Measurement of Poverty
To the classical school of thought, such improvement can
only be real and sustained, if and only if, the population But how do we measure poverty without losing sight of its
growth is checked and the “limits of growth” are eliminated. various dimensions?
Further, the early classical theorists in the attempt to illu- Ajakaiye and Adeyeye (1999) stressed that Poverty
minate on the concept of poverty based their analytical measurement is undertaken to:
framework on the laws of diminishing returns which was  Determine a yardstick for measuring standard of living.
believed to be universal in content although this was later  Choose a cut-off poverty line, which separates the poor
upgraded at the time of Alfred Marshall and his contempo- from the non -poor(indication of how many people are poor).
raries when the law of increasing returns in industry was  Take account of the distribution of standard of living
more clearly articulated. among the poor.
Understanding the nature of poverty perhaps received a  Comparison of poverty overt time, among individuals,
boost following Marxian theoretical formulation largely group or nations.
based on the principle of exploitation of labour. Marxian  Guide policy on poverty alleviation.
theoretical formulations presents the economy as ultimately  There are certain desirable properties of the measure of
polarized into a few rich capitalists and the masses made up poverty. They are:
of the poor miserable workers. Technological progress, it  Monotonicity axiom (i.e measure of poverty should
was argued, would be labour saving, resulting in displace- increase when the income of the poor household decreases).
ment of workers to join the reserved army of the unemployed,  The transfer axiom i.e poverty of household should
whose presence depresses the wage level. increase when income is transferred from a poor to a less
Joseph Bocke developed a model of dualistic economies poor household.
which was later popularized by Arthur Lewis. In accordance  Demonstrate the distribution of living standard among
with this model, the national economy was divided with two the poor.
parallel institutional production sectors, namely, the tradi-  The measure should be additively decomposable by
tional sector and the modern sector. The latter is dominated population sub groups.
 American Journal of Economics: 2012; 2(1): 25-36 27

Measurement of poverty is complex and varied. Discus- The requirement level is k which is taken to be fixed (this
sion of poverty measure has, therefore, commenced with the can be readily relaxed). As long as the expected value of
simple living standard measure, poverty line determination food-energy intake conditional on total consumption ex-
and array of measures involved in absolute and relative penditure, E (k/y), is strictly increasing in y over an interval
poverty measures. Measure of poverty that enables us show which includes k then there will exist a poverty line z such
its decomposability by population, capture issue of social that
capital and how the poor themselves measure poverty have E (k/z) = k
been highlighted. This can be termed the “food-energy- intake” (FEI)
Living standards: This is generally measured using current method (Ravallion, 1994; (Ravallion and Bidani, 1994). The
consumer spending or income. A measure of current con- method has been used in numerous countries; for example
sumer spending is generally preferred to income as a meas- see Dandekar and Rath (1971), Osmani (1982), Greer and
ure of current living standards for two reasons. First, current Thorbecke (1986), and Paul (1989).
consumption is often taken to be a better indicator than cur- Figure 1 illustrates the method. The vertical axis is
rent income because instantaneous utility depends directly food-energy intake, plotted against total income or expen-
on consumption, not on income per se. Second, current diture on the horizontal axis. A line of “best fit” is indicated;
consumption may also be a good indicator of Long-term this is the expected value of caloric intake at a given value of
average well-being, as it will reveal information about in- total consumption. By simply inverting this line, one then
comes at other dates, in the past and future. This is because finds the expenditure z at which a person typically attains the
incomes (including those of the poor) often vary over time in stipulated food-energy requirement.
fairly predictable ways-particularly in agrarian economies Food-energy intake (calories per day)
such as Nigeria. Alderman and Paxson (1992), Deaton
(1992). Further, income as a measure of living standards is
often questioned on the ground of incorrect rendition by the
respondents. On balance, consumption expenditure is pre-
ferred to income as a measure of living standard.
Poverty lines in Theory: A poverty line can be defined as
the monetary cost to a given person, at a given place and time, Figure 2. The Food-Energy Intake Method
of a reference level of welfare. People who do not attain that
level of welfare are deemed poor; and those who do are not. Once food-energy requirements are set, the FEI method is
A distinction is sometimes made between “absolute poverty computationally simple. A common practice is to calculate
line” and “relative poverty line”, whereby the former has the mean income or expenditure of a sub-sample of house-
fixed “real value” over time and space, while a relative holds whose estimated caloric intake are approximately
poverty line rises with average expenditure. Arguably, for equal to the stipulated requirements. More sophisticated
the purposes of informing anti -poverty policies, a poverty versions of the method use regressions of the empirical re-
line should always be absolute i n the space of welfare. Such lationship between food energy intake and consumption
a poverty line guarantees that the poverty comparisons made expenditure. These can be readily used (numerically or ex-
are consistent in the sense that two individuals with the same plicitly) to calculate the FEI poverty line.
level of welfare are treated the same way. The cost-of-basic-needs method: This method stipulates a
Objective Poverty Lines: Objective poverty line ap- consumption bundle adequate for basic consumption needs,
proaches can be interpreted as attempts to anchor the refer- and then estimates its cost for each of the subgroups being
ence utility level to attain basic capabilities, of which the compared in the poverty profile; this is the approach of
most commonly identified relate to the adequacy of con- Rowntree in his seminal study of poverty in York in 1901
sumption for living a healthy and active life, including par- and it has been followed since in innumerable studies for
ticipating fully in the society. Sen.(1985, 1987). Two both developed and developing countries. This is called the
methods of measuring objective poverty line are food energy “cost-of-basic-needs” (CBN) method. One can interpret this
intake and cost of basic needs. method in two quite distinct ways. It can be interpreted as the
The food-energy intake method: A popular practical “cost-of-utility”, By the second interpretation, the definition
method of setting poverty lines involves finding the con- of “basic needs” is deemed to be a socially determined
sumption expenditure or income level at which food energy normative minimum for avoiding poverty, and the
intake is just sufficient to meet pre-determined food energy cost-of-basic-needs is then closely analogous to the idea of
requirements. Setting food-energy requirements can be a statutory minimum wage rate. Poverty is then measured by
difficult step. For instance, requirements vary across indi- comparing actual expenditures to the CBN. There are food
viduals and over time for a given individual. Food energy and non - food components of CBN with different computa-
intake will naturally vary at a given expenditure level, y. tion.
Recognizing this fact, the method typically calculates an The Food Component: The food component of the poverty
expected value of intake. Let k denote food-energy intake, line is almost universally anchored on nutritional require-
which is a random variable. ments for good health. To compute the food component of
28 Olatomide Waheed Olowa: Concept, Measurement and Causes of Poverty: Nigeria in Perspective

CBN a simple method is to set a bundle of goods in each or the income gap ratio is the difference between the poverty
region (say). One difficulty with the core basic needs method line and mean income of the poor, expressed as a ratio of the
is the determination of the minimum requirement for the poverty line (World Bank, 1993). The average income
non- food needs. There are no agreed standards of needs for shortfall I, measure the amount of money it would take to
non -food items”. This is because these non -food needs are raise the income of the average poor person up to the poverty
determined b y environmental conditions, as well as institu- line. That is, it provides a statement on the level of income
tional structures, technology and customary modes of life. In transfer to the ‘poor’.
order compute non -food items the monetary value can be Composite poverty measures or index is attributed to Sen
attached to most of the non - food items. But in using this (1976). It incorporates the headcount index, the income gap,
method, it is necessary that the costs of the non- food needs and the Gini coefficient. Sen poverty index (s) is:
included should not be lower than the prevailing cost for S = H[I + (1 – I) Gp]
such items, even when the minimum standards are not met. Where
Subjective Poverty Lines: Subjective poverty line debate I = the average income shortfall as a percentage of the
has opened another issue on poverty conceptualization and poverty line
measurement. Psychologists, sociologists and others have y1 = income of the ith poor household
argued that the circumstances of the individual relative to z = poverty line income
others in some reference group influence perceptions of qz = number of households with incomes below z
well-being at any given level of individual command over H = q/n; headcount ratio
commodities. By this view, “the dividing line between ne- N = total number of households
cessities and luxuries turns out to be not objective and im- Gp = Gini coefficient among the poor = 0 = Gp > 1.
mutable, but socially determined and ever changing” (Sci- S is an increasing function of the headcount index and an
tovsky, 1978). Some have taken this view so far as to increasing function of the income shortfall. Given that the
abandon any attempt to rigorously qualify “poverty”. Pov- Gp ranges from zero to one, S is also an increasing function
erty analysis has therefore, become polarized between the of Gp:
“objective-quantitative” schools and “subjective-qualitative” dS dS dS
>0 >0
schools, with rather little effort at cross-fertilization. “Sub- dH dI dGDP > 0
jective poverty lines” have been based on answers to the The Sen index has a major drawback. It is more responsive
“minimum income question” (MIQ), such as the following to improvements in the headcount than it is to reduction in
(paraphrased from Kapteyn et al 1988): “What income level the income gap or to improvements in the distribution of
do you personally consider to be absolutely minimal? That is income among the poor. This index indicates that the effi-
to say that with less you could not make ends meet”. One cient way to reduce poverty is to help the least needy first and
might define as poor everyone whose actual income is less the neediest last.
than the amount they give as an answer to this question. The physical quality of life index (PQLI): The PQLI is
While the MIQ has been applied in a number of OECD attributed to Morris (1979). It measures how well societies
countries, there have been few attempts to apply it in a de- satisfy certain specific ‘life-serving social characteristics’ or
veloping country. There are a number of potential pitfalls. ‘achieved well-being’ (Doessel and Gounder, 1994). Thus its
Income is not a well-defined concept in most developing focus is on social development. The PQL is based on three
countries, particularly (but not only) in rural areas. It is not at indicators: infant mortality, life expectancy and basic liter-
all clear whether or not one could get sensible answers to the acy. Computationally, PQL is given by:
MIQ. The qualitative idea of the “adequacy” of consumption PQL = f (IM, e, It)
is a more promising one in a developing country setting. Where
Absolute poverty can be measured in seven different ways. IM = infant mortality
They are the headcount ratios/incidence of poverty, the e = life expectancy
poverty gap/income shortfall, composite poverty measures, Lit = literacy
the physical quality of life index (PQLI), the augmented The indices formed from these three indicators are
physical quality of life index (PAQLI), and the human de- summed up and the average give the PQLI (physical quality
velopment index (HDI). of life index).
Head Count Ratio: Poverty can be expressed in a single PQL1 =
1M 1 + el + Lit1
index: The simplest and most common measure is the Head 3
Count ratio (H), which is the ratio of the number of poor to Where,
total population. This gives the proportion of the population IMI = infant mortality index
with income below the poverty line. The head count ratio has el = life expectancy index
been criticized for its focus only on the number of the poor Lit = Literacy index
and being insensitive to the severity of poverty and to The human development index (HDI): The HDI is the
changes below the poverty line. That is, it treats all the poor most recent composite index devised by the United Nations
equally, whereas not all the poor are equally poor. Development Programme (UNDP, 1990). This index focuses
The poverty gap/income shortfall: The poverty gap ratio on human development. It incorporates income and non
 American Journal of Economics: 2012; 2(1): 25-36 29

-income factors. Three factors- longevity, knowledge and between the average poor person and the poverty line. This
income are the variables of the index. Longevity is measured index measures the depth of poverty and it is also referred to
by life expectancy at birth (e0), knowledge is measured in as income gap’ or ‘poverty gap’ measure. Although superior
terms of literacy. The third variable is per capita income. to P0, PI still implies uniform concern about the depth of
Generally, therefore, UNDP’s human development HD is poverty, in that it weights the various income gaps of the
specified as: poor equally. P2 or FGT index allows for concern about the
HD = f (e0 , Lit , Y ) poorest of the poor through attaching greater weight to the
Where, poverty of the poorest than those just below the poverty line.
e0 = life expectancy at birth This is done by squaring the income gap to capture the se-
Lit = literacy rate verity of poverty:
Y = per capita income 1 q  Z − yi 
2

These three indicators-life expectancy, literacy, and the P2 = ∑ 

n i =1  Z 
logarithm of real GDP per capita are specified at the national
level as components of the index. By looking across a range This index satisfies the Sen-Transfer axiom which re-
of countries, the maximum and minimum values for each quires that when income is transferred from a poor to a
indicator are established (Ajakaiye and Adeyeye, 1999). poorer person, measured poverty decreases. Another ad-
Relative poverty measures: Relative poverty measures vantage of the P-alpha measures is their decomposability.
define the segment of the population that is poor in relation The overall poverty can be expressed as the sum of groups;
to the set income of the general population. Such a poverty poverty weighted by the population share of each group.
line is set at one-half of the mean income, or at the 40th Thus,
percentile of the distribution. There are two main kinds of Pα = ∑ KJPα J
relative measures. Average income, this is the average in- Where j= 1,2,3 … m groups, Kj is population share of
come of the poorest 40 percent of the population and/or the each group, and P j is poverty measure for each group. The
average income of the poorest 10 or 20 percent of the contribution of each group, Cj, to overall poverty can then be
population. The second is the number or population of peo- calculated. The contribution to overall poverty, like in the
ple whose incomes are less than or equal to predetermined case of inequality, well provides a guide as to where poverty
percentage of the mean income say 50% or less of the mean is concentrated and where policy interventions should be
income. targeted.
Composite measure of poverty proposed by Foster, Greer
and Thorbecke (FGT) (1984): Foster et al (1984) proposed a
family of poverty indices, based on a single formula, capable 3. Nigeria Poverty Profile and Causes of
of incorporating any degree of concern about poverty Poverty
through the “poverty aversion” parameter, α . This is the
3.1. The Poverty Profile
so-called P-alpha measures of poverty or the poverty gap
index: Nigeria's economy relies heavily on oil, which constitutes
α almost all its exports and budgetary revenues. In 1973, the
1 q  Z − yi 
Pα ( y, z ) = ∑  first oil shock brought a dramatic positive impact on most
n i −1  Z  economic indicators; real per capita income, private con-
Zi s the poverty line, q is the number of house- sumption and real wages rose sharply. At the same time,
holds/persons below the poverty line, N is total sample according to Anusionwu and Diejomoah (1981), income
population, Yi is the income of the household, and α is the inequalities increased sharply, particularly between urban
FGT parameter, which takes the values 0, 1 and 2, depending and rural areas, and primarily as a result of oil booms and
on the degree of concern about poverty. The quantity in their spin-offs. Between 1980 and 1985, economic condi-
parentheses is the proportionate shortfall of income below tions worsened, mainly because of the decrease in the in-
the poverty line. By increasing the value of α the “aversion” ternational price of oil. The oil boom contributed to a large
to poverty as measured by the index is increased. For ex- appreciation of the naira (with a negative impact on non-oil
ample, where there is no aversion to poverty, α = 0, the tradeables, especially agriculture, and harming employment
index is simply and income for the immobile). In 1986, the government
1 H adopted a structural adjustment programme. The deprecia-
P 0 q= q
=
N N tion of the naira combined with the rising oil prices in 1990
This is equal to the head-count ratio. This index measures boosted the economy; between 1986 and 1992, real GDP
the incidence of poverty. If the degree of aversion to poverty grew by an average of 5% per year, but economic growth
is increased such that when α = 1, the index becomes slowed again during 1993-1995. According to the World
Bank (1996b), by 1994 real per capita income and con-
1 q  Z − yi 
P1 = ∑  sumption were hardly above levels in 1971.
n i =1  Z  •severity of poverty as well as the incidence of extreme
Here the head-count ratio is multiplied by the income gap poverty increased between 1985 and 1992. While the abso-
30 Olatomide Waheed Olowa: Concept, Measurement and Causes of Poverty: Nigeria in Perspective

lute number of poor decreased from 36 million to 34.7 mil- the extremely poor in 1992 (though falling from 87% in 1985
lion between 1985 and 1992, the number of extreme poor to 67% in 1992), followed by sales workers (rising from 4%
increased from 10 million to 13.9 million. Income inequali- of the extremely poor to 10%, respectively).
ties among the whole population increased from 0.387 in •In 1985, the incidence of poverty was 48% among the
1985 to 0.449 in 1992, and the Gini among the poor from population with no education, 36% among the population
0.188 to 0.251. The poor have the following characteristics with primary education, 28% among the population with
(World Bank, 1996b): secondary education and a surprisingly high 24% among the
•In 1992, 62% of the population was rural. Among these population with post-secondary education. In 1992, these
63 million people, 22.8 million were poor (36%), while 9.6 figures were 40%, 29%, 23% and 23%.
million were extremely poor (15%). In urban areas, the in- The NBS (2005) conducted five surveys which revealed
cidence of poverty was 30% and the incidence of extreme that national poverty rates was 28.1percent (1980), 46.3 per
poverty 11%. Poverty intensity was 16% for the rural poor cent (1985), 42.76 per cent (1992), 65.6 per cent (1996) and
and 12% for the urban poor. The overall decline in national 54.4 per cent for 2004. Poverty incidence in the country
poverty between 1985 and 1992 masks different trends for recorded increases between the period 1980 and 1985 and
the urban and rural sectors. Urban poverty incidence in- between 1992 and 1996. The results also show appreciable
creased and rural poverty declined. The number of poor in decrease in poverty rates between 1985 and 1992 and be-
rural areas fell from 26.3 to 22.8 million, while in urban areas tween 1996 and 2004. Even with the drop in poverty rates,
it rose from 9.7 to 11.9 million For the extreme poor, there the population in poverty has maintained a steady increase
was a similar trend of urban immizeration, with a huge in- from 17.7 million in 1980 to 68.7 million in 2004 (NBS,
crease of extreme poverty in urban areas from 1.5 million to 2005).
4.3 million and a small increase in rural extreme poverty Considering the period, 1980-2004, the proportion of the
from 8.6 to 9.6 million. core poor increased from 6.2 per cent in 1980 to 29.3 per cent
•The incidence of poverty was greater among in 1996 and then came down to 21.8 per cent in 2004. For the
male-headed households than female-headed households: for moderately poor the picture is quite different as the propor-
male-headed households it was 44% at the national level in tion recorded increased between 1980 and 1985 from 21.0
1985 and 36% in 1992, against 37% and 21%, respectively, per cent, 34.2 per cent, and 1992 and 1996 28.9 per cent to
for female-headed households. In 1992, male-headed 36.5 per cent but decreased during the periods 1985 and 1992
households formed 90% of all households and contributed to from 34.2 per cent to 28.9 per cent and 1996-2004 from 36.3
92% of rural poverty and to 87% of urban poverty. Despite per cent to 32.4 per cent.
being the largest economy in sub-Saharan Africa, with some
20% of the region’s population, little information on poverty 3.2. Nature and Dimension of Poverty in Nigeria
and inequality in Nigeria is available. The World Bank's The findings of National Bureau of Statistic (2005) using
poverty assessment on Nigeria (1996b) provides one of the Nigeria Living Standard Survey 2004 revealed the various
few good overviews of poverty and its correlates over the nature, dimensions and characteristics of the poor. The report
1980s. It relies mainly on two national consumer surveys, of provided avalanche evidence on some of the poverty mea-
1985 and 1992. With a relative upper poverty line of surement techniques and dimensions earlier discussed in
two-thirds of 1985 mean per capita household expenditure, preceding paragraphs.
poverty incidence decreased from 43% to 34% between 1985 Poverty Trends
and 1992. Using an extreme poverty line of one-thirds of Relative Poverty Measure
mean expenditure, the proportion of the population in ex- The national incidence of relative poverty increased
treme poverty rose from 12% in 1985 to 14% in 1992. In- sharply both between1980-1985 and between 1992 and 1996.
tensity and Unusually (cf. Lipton, 1995), poverty incidence The national incidence of relative poverty dropped from 65.6
was the lowest among households whose head was between per cent in 1966 to 54.4 per cent in 2004 representing 11.2
16 and 25 years old (in this category 20% were poor in 1985 per cent decline over the period. The disaggregation by
and 22% in 1992). The older the household head, the more sector showed a sharper decline in the urban areas between
likely the household to be in poverty; in 1985, among 1996 and 2004. In the urban areas it declined from 58.2 per
households with heads between 36 and 55 years, 46% were cent in 1996 to 43.2 per cent in 2004, which represented a
poor (36% in 1992); in households with heads over 66 years, decline of 15.0 per cent. In the rural areas, it declined from
52% were poor in 1985 (35% in 1992). 69.8 per cent in 1996 to 63.3 per cent, representing 6.5 per
•Employment status of the household head was closely cent decline.
related to poverty in both 1985 and 1992, though rural and Objective Poverty Measure (Food Energy In-take)
national poverty incidences fell for all status groups. In 1985 The result of the 2003/2004 survey revealed that the na-
and 1992, at the national, rural and urban levels, the highest tional incidence of poverty using food consumption of 2900
incidence of poverty was found among the self-employed: at calories limit was 36.6 per cent but when disaggregated by
the national level, in 1985, their poverty incidence was 53% sector gave 26.5 per cent and 44.1 per cent for urban and
against 46% for wage earners (in 1992 it was 35% against rural areas respectively. However, the national incidence of
28%). Agricultural workers formed the largest component of poverty combining food consumption of 2900 calories with a
 American Journal of Economics: 2012; 2(1): 25-36 31

component of non-food was 54.7 per cent. Further sectoral creasing levels of quintile. The poorest quintile had 40.1 per
disaggregation showed urban poverty rate of 43.1 per cent cent compared with 66.1 per cent of the least quintile. On the
and rural poverty rate of 63.8 per cent. highest level of education attended, about half (48.0 per cent)
Usage of Adjusted Dollar per day of the households in the first quintile had no education
The dollar per day gave a national poverty incidence of compared with about 25.0 per cent of the households in the
51.6 per cent. The urban poverty incidence was 40.1 per cent fifth quintile.
compared with rural poverty incidence of 60.6 per cent. Housing Conditions
Subjective Poverty Measure The housing conditions of households can also serve as
The subjective measure of poverty, which was a proxy for welfare measurement. About two-thirds (66.0 per
self-assessment, indicated a national incidence of poverty of cent) of the households lived in single rooms, while about
75.5 per cent, which disaggregated into 70.7 per cent for one-quarter (24.1 per cent) of the households lived in whole
urban areas, and 79.2 per cent for rural areas. This measure buildings. Seventy per cent of the households used firewood
generally increased poverty results because it is based on as the main source of fuel for cooking, more than a quarter
perception of the people. (26.6 per cent) used kerosene, while only 1.1 per cent used
Human Development Dimensions of Poverty gas. The use of mud for wall construction was highest (58.5
Health per cent) for the poorest households, while the use of cement
The status of health is a strong indication of human de- or concrete was highest (66.0 per cent) for the least poor
velopment and can also serve as an indicator for poverty. The households. The overall access to safe water in the house-
survey result revealed that about 8.0 per cent of the popula- holds was 60.0 per cent. The usage of unprotected well or
tion consulted health care providers because of low level of rainwater was highest (23.0 per cent) in the poorest quintile
awareness, poor facilities and high cost. The quintile analysis while the usage of pipe-borne water was highest (28.0 per
showed that about a quarter (25.56 per cent) of population in cent) in the least poor quintile, the fifth quintile.
the first quintile (the poorest) and more than half of the Poverty and Agriculture
population (56.0 per cent) in the fifth quintile (least poor) Poverty in Nigeria is a rural phenomenon where agricul-
consulted medical doctors. The same survey indicated rea- tural activities are most predominant.
sonable consultation of traditional healers by all levels of More than four-fifths (86.5 per cent) of the households
quintiles. About 12.0 per cent of the population of the first participated in agriculture in the rural areas compared with
quintile and 8.0 per cent of the population of the fifth quintile only 14.0 per cent in the urban areas. Gender-wise, more
consulted traditional healers. males participated in agriculture. Twenty-eight per cent and
HIV/AIDS 15.3 per cent of males and females respectively participated
Nine in ten households surveyed were aware of in agriculture.
HIV/AIDS among the population. The awareness increased The poor participated more in agriculture than
with the level of quintiles from 90.2 per cent in the poorest non-agriculture. Twenty-five per cent of the core poor
households to 96.0 per cent in the least poor households. The households were in agriculture, while 20.0 per cent were in
main source of information on HIV/AIDS was radio, which non-agricultural activities. A similar pattern was revealed
was 82.0 per cent. Radio, Television and friends accounted among the moderately poor households. The non-poor
for about 90.0 per cent of the source of information from the households participated less in agriculture (about 37.0 per
survey findings. In all the levels of quintiles four in five cent), with 46.1 per cent in non-agriculture. More than
household members had information from radio. In the same four-fifth (81.0 per cent) of the livestock were owned by
vein, more than forth-fifth (83.5 per cent) of the households rural households, while 91.1 per cent of the ownership were
protected themselves from HIV/AIDS and other STDs. the male-headed households. This is an indication of ‘fem-
About 5.0 per cent of the households had undergone tests for inisation’ of poverty.
HIV/AIDS. The overall rate for knowledge of HIV/AIDS Gender and Poverty
centres was 56.0 per cent. About eight in ten of the members Male-headed households were more likely to be in poverty.
of the households used condom for protection. The trend results showed for male-headed households that
Education relative incidence of poverty varied increasingly from 29.2
Education is a good measure of human development. The per cent to 58.2 per cent from 1996 to 2004. The results for
correlation of levels of education with levels of poverty the female-headed households also varied increasingly from
serves as a good measure for manifestations of poverty 26.9 per cent to 43.5 per cent from 1998 to 2004. The literacy
across the quintiles. The findings showed increasing trend of rate was highest for the males who could read and write in
ever attending school with increasing level of quintile. About English. The rates were 59.8 per cent and 44.6 per cent for
70.0 per cent of the surveyed households had ever attended male-headed and female-headed households respectively.
school. The ability to read and write in English language The overall average of school attendance was 54.00 per cent
could determine the ‘voicelessness’ and powerlessness of the for males and 46.0 per cent for females. On time-use on
population. The results showed that about half (52.1 per cent) household activities, the females devoted more of their time
of the households could read and write in English language. in this order: child care (17.2 per cent), cooking (10.1 per
The quintile results showed an increasing figure with in- cent), care of the elderly (9.8 per cent) and recreation (8.3 per
32 Olatomide Waheed Olowa: Concept, Measurement and Causes of Poverty: Nigeria in Perspective

cent). The males used more of their time too on childcare •Macroeconomic shocks and policy failure: This has been
(9.9 per cent), recreation (8.2 per cent), care of the elderly a major cause of poverty in several countries of the world. As
(8.2 per cent), going to market (6.67 per cent) and cooking many economies in the world faced macroeconomic dis-
(6.62 per cent). equilibrium, mostly in the balance of payments due to ex-
Household Expenditure pansive aggregate demand policies, terms-of-trade shocks,
The quintile analysis showed a high degree of disparity on and natural disasters, it become necessary to undertake major
expenditure pattern. The poorest per capita expenditures policy reforms. In the process such economies became vul-
were 4,291.00 on food and 3,520.00 on non-food, while the nerable to poverty. Macro-economic shocks and policy
least poor per capita expenditures were 29,489.00 on food failure account for poverty largely because they constrain the
and 39,543.00 on non-food. The urban households expended poor from using their greatest asset “labour”. Also, monetary
more on food and non-food compared with rural households. policies that adversely affect cost and access to credit by the
The urban households’ per capita household expenditure on poor, fiscal policy which results in retrenchment, lay-off and
non-food almost doubled that of the rural households. The factor Substitution; exchange rate policy which raises the
figures were 25,101.00 and 13,058.00 respectively. The per domestic cost of production in an import dependent produc-
capita household expenditures on food were 18,099.00 and tion system will affect the poor negatively. However, an
16,568.00 in urban and rural areas respectively which still exchange rate policy which boosts exports particularly those
showed higher expenditure in urban areas. The rural in which the poor are predominantly engaged (for example
households expended more of their income on food. agriculture) will help reduce poverty. The urban poor, as a
result of policy failure, are vulnerable to job losses resulting
3.3. Causes of Poverty in Nigeria from job-cut-backs in the public sectors or from the decline
There is no one cause or determinant of poverty. On the of industries adversely affected by shifts in relative prices.
contrary, combination of several complex factors contributes They also lose from the removal of food subsidies and other
to poverty. They include low or negative economic growth, welfare packages. Further, devaluation produced both nega-
inappropriate macroeconomic policies, deficiencies in the tive and positive effects on equity and poverty incidence. On
labour market resulting in limited job growth, low produc- the negative side higher production costs of import, espe-
tivity and low wages in the informal sector, and a lag in cially in import dependent economy usually result in de-
human resource development. Other factors which have clining capacity utilization rate in manufacturing and lay
contributed to a decline in living standards and are structural –off and retrenchment in the private sector all worsening
causes or determinants of poverty include increase in crime poverty.
and violence, environmental degradation, retrenchment of •Labour markets deficiencies: The poor’s most abundant
workers, a fall in the real value of safety nets, and changes in resource is their labour, a virile labour market is important to
family structures (Ajakaiye and Adeyeye, 1999; Ogwumike, reducing poverty and income inequality. In most countries of
2002 and NPC, 2004). These are examined below: the world the majority of poor households participate in the
•Low economic growth performance: Growth of the labour market in one way or another, and thus poverty is a
economy is a must for poverty reduction. In developing problem of low wages (in the informal sector), low labour
countries such as Nigeria growth that is employment gener- returns to rural self-employment activities, underemploy-
ating and with export base is desirable in order to achieve ment, and in some cases, protracted unemployment. These
growth that is poverty reducing with equity. Although the problems are affected in different ways by deficiencies in
economic performance of countries in the World has gener- labour market. The majority of the labour force work as paid
ally been highly volatile since the early 1980s, on the whole, employees in the private informal sector, followed by em-
growth rates have been low or negative, with overall declines ployees in the public sector. When there are deficiencies in
in several countries. This is due in part to external shocks labour market, the poor are affected by limited job growth
such as adverse changes in several countries’ terms of trade, and absorption capacity in the formal sector. Also, relatively
changes in global demand for exports and changes in global high labour costs in the formal sector that lead to over ex-
interest rates on developing countries external debt. All these pansion of a low-productivity informal sector, thus putting
are probably responsible for the increase in poverty level in downward pressure on wages in the informal sector (where
various countries of the world. Extensive evidence links the many of the poor work), and limited opportunities for un-
importance of economic growth to poverty reduction (see skilled youth to acquire job training and skills can perpetuate
World Bank 1990). For example, in Indonesia and Thailand a cycle of poverty.
poverty was reduced by between 30 and 40 percent during a •Migration: Migration rates do reduce poverty especially
twenty -year period in which annual growth rates were ap- when the majority of individuals who migrate are skilled
proximately 3 percent (investments in the social sectors also workers. On the other hand, individuals who emigrate vacate
contributed). Accordingly, of a sample of countries, those jobs in labour markets. Thus, migration drains on skills. It
that reduced poverty the least (for example, India and Sri reduces the pace of economic growth and thus slows the
Lanka) had growth rates of less than 1 percent. Growth can process of overall job creation and affects the long-run de-
reduce poverty through rising employment, increased labour velopment potential in a country. Unemployment and un-
productivity and higher real wages it generates. deremployment: Employment is a key determinant of pov-
 American Journal of Economics: 2012; 2(1): 25-36 33

erty. Gainful employment is important for individual to earn between Nigeria and her creditors (Paris Club) during the
income and escape from “income” poverty. While generally Obasanjo’s regime, by 2011 debt portfolio was projected to
in countries of the world the non poor suffer from transitional represent 12% of GDP. Amount required to service this debt
or involuntary unemployment, the poor are faced with annually is enough to hamper government expenditure for
problems of structural unemployment due to lack of skills or the provision of social and physical infrastructure for the
extremely low educational levels, medical problems, geo- poor.
graphical isolation (which affects some of the rural poor in •Governance: The persistence and pervasiveness of pov-
general and the urban poor due to marginalisation of persons erty in several countries has been linked to the lack of
living in high- crime neighbourhood) and in some countries, popular participation in governance and decision -marking as
discrimination based on race or other attributes. Further, well as weak institutional base. This has led among other
underemployment occurs largely in the informal sectors and things to poor accountability, transparency in resource allo-
results in low incomes for an important segment of the labour cation, weak programme implementation and monitoring.
force, particularly in rural areas. Unemployment is due more Ultimately, development programmes are rendered ineffec-
to slow economic growth than to the direct effects of im- tive poverty reduction initiatives are therefore ineffective
perfections in the labour market, although regulations af- and resources wasted.
fecting the formal sector are likely to induce more under- •Environmental Degradation: Environmental degradation
employment in the informal sector. In poorer, rural areas, is a cause of accentuated poverty. At the same time, poverty
this mainly takes the form of seasonal unemployment and in itself can be a cause of environmental degradation. This
urban areas those who have given up searching for work. reverse causality stems from the fact that for poor people in
High unemployment particularly affects youths, women poor countries such as Nigeria, a number of environmental
urban dwellers, and those “queuing” for good jobs in the resources are complementary in production and consumption
formal sector. to other goods and services while a number of environmental
•Human resource development: This is germane to human resources supplement income most especially in time of
capital development and capability to escape from poverty. acute economic stress (Falconer and Arnold, 1989). This can
Continued investment in human capital with improvements be a source of cumulative causations, where poverty, high
in efficiency is necessary to sustain reduction in poverty fertility rates and environmental degradation feed upon one
changes in the labour market. Investment in people can boost another. In fact, an erosion of the environmental resource
the living standards of households by expanding opportuni- base can make certain categories of people destitute even
ties, raising productivity, attracting capital investment, and when the economy on the average grows (Dasgupta, 1993) In
increasing earning power: In addition, providing additional several countries of the world inaccessibility of the poor to
educational opportunities for adolescents may prevent some credit and resource inputs leave them with no choice order
youths from becoming involved with gangs, drugs and vio- than to employ natural resources such as forests, woodlands
lence, given the evidence linking the perpetrators of crime and rivers in order to survive. Quite often, their continuous
with school dropouts. exploitation of these resources have led to stress/depletion
•III-Health/Diseases: Good health is basic to human and environmental degradation thereby making poor both
welfare and a fundamental objective of social and economic agents and victims of unsatisfactory ecological practices. In
development. Poor health shackles human capital, reduces most rural areas, developing countries fallow duration has
returns to learning, impedes entrepreneurial activities and declined to four to five years and in several instances as low
holds back growth and economic development. Diseases as two years. Short fallow period is usually not adequate for
cause poverty and vice versa. In most countries of the World regeneration of vegetation and the restoration of host nutri-
major diseases causing poverty are Malaria, HIV/AIDS and ents; soil and water quality are therefore quickly depleted.
other infections/diseases. In Nigeria for instance, AIDS Among the poor; frequent cutting of forest trees with low
prevalence is about 5.4% with an infected adult population of replanting rate has resulted in scarcity of fuel wood. Imme-
2.6 million (Ajakaiye and Adeyeye, 1999). This will con- diate effect of this is that poor households turn to alternative
strain availability and participation of this segment of the fuels such as crop residues, coconut husks, and rice hulls or
population in the labour market to earn income. elephant grass. The smoke from these inferior fuels accord-
•Debt burden: In several developing countries of the ing to Cece Laki (1985), is often more poisonous than that of
world, debt burden is assuming increasing importance as a fuel wood, while emissions from all biomass fuels are known
cause of poverty. In such countries servicing of the debt has to be dangerous sources of air pollution in the house. Also,
encroached on the volume of resources needed for scarcity of fuel woods forces women to make what is
socio-economic development. The productive sector such as available burn slowly. WHO (1984), reckons that under slow
agriculture, manufacturing etc are equally constrained lead- burning conditions wood fuels are capable of producing
ing to low productivity, low capacity utilization, under em- pollution concentrates higher than fossil fuels and subject the
ployment and low purchasing power thereby subjecting the households to more smoke pollutants. The incessant cutting
masses of the people to abject poverty. In Nigeria, at the end down of trees for firewood and charcoal have hindered
of December 2000 external debt stood at US$28.5 (about prospect for increased yield and hasten the prospect of the
80% of GDP),though , a debt pardon deal was brokered creeping desert while profligate use of the country’s re-
34 Olatomide Waheed Olowa: Concept, Measurement and Causes of Poverty: Nigeria in Perspective

sources by industries and industrial pollution from improper percent of rural people depend on natural resources for their
waste disposal has further exacerbated the plight of the poor. livelihood, hence environmental degradation reduces op-
Other consequences of over exploitation of environment due portunities for poor people to earn sustainable income.
to poverty are depletion of fish in the local rivers and Globalization equally worsens the situation of poverty as
streams. the basis of challenge and competitions are lacking thus this
•Crime and Violence: A steady increase in crime and has manifested in several ways. For instance, the debt bur-
violence has degraded the quality of life to a varying extent den increased from $14.28 billion in 1980 to about $32 bil-
in many counties of the world. Although individuals of all lion in 2000 (Oyeduntan, 2003).
socioeconomic groups are affected, the urban poor are par-
ticularly vulnerable to these social problems. There are in-
stances of shootings, gang killings; etc Crime and Violence
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